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The upgrade in Moody’s ratings has brought more reasons to cheer for the financial sector after the historic increase in World Bank’s ease of doing rankings and wide ranging reforms undertaken by the government. The global ratings agency upgraded India’s credit rating after a gap of almost 14 years.
Moody’s has also upgraded four Indian banks to Baa2 from Baa3 – the same level as the Indian government. The four lenders are State Bank of India, HDFC Bank, Exim Bank and Indian Railway Finance Corporation.
Bankers lauded the sovereign ratings upgrade by Moody’s to Baa2, saying the long-pending move is a thumbs up to the reforms and an enabling factor for the economy, particularly the financial sector as it will make overseas funds cheaper.
Describing the rating upgrade as a “re-affirmation of how the world views India, and a long pending step,” State Bank of India (SBI) Chairman Rajnish Kumar said this is “a thumbs up to the various reform measures and will bring the cost of foreign borrowings automatically down.” ICICI Bank chief Chanda Kochhar, whose rating was also upgraded along with four others, said, “It (also) shows that Moody’s has taken cognizance of our higher growth potential and increased economic resilience compared to other countries in our rating cohort.”
“I always felt that the country’s rating was far below from what it should be, particularly since the last two-three years with the number of reforms that the government has undertaken,” HDFC chairman Deepak Parekh said.
“It’s a little too late; we should have got it much earlier. One notch up is okay but then they have not put the outlook positive, they have put it only stable,” he added.
Complementing the reforms that government has taken particularly in the last year-and-a-half, he said: “I’ve not seen such strong macro fundamentals as we have today. But somehow the rating agencies see it differently, I think bank recapitalisation made them convince that we are on a reform path and we mean business and we are going to tackle NPAs.”
Kotak Mahindra Bank’s Uday Kotak said though the upgrade is positive in the long-term and sends a clear signal to the world that we are moving towards stability, “we have to do a lot more to get up the curve as we’ve a long road ahead and must continue down the path of reform.” Investor wealth also surged by Rs 1.71 lakh crore, helped by a bullish market sentiment, where the Sensex rose by 236 points.